Does crackdown on corruption reduce stock price crash risk? Evidence from China
By Yunsen Chen, Yuan Xie, H. You, Yanan Zhang. Journal of Corporate Finance, 2018
164 citations recorded by the source corpus.
This study examines whether crackdown on political corruption in China affects future stock price crashes. Using data from corruption-related prosecutions, we find that firms under prosecuted official jurisdictions experience a significant decrease in crash risk after the crackdown. Cross-sectional tests show that results are more pronounced for firms with higher political dependence on governments and for firms with worse information environment. Moreover, channel tests provide direct evidence that crackdown decreases crash risk by reducing political risk and bad news hoarding. Overall, our study offers novel evidence on how crackdown on corruption benefits firms.
Subfields: Accounting, Sociology and Political Science
View Paper: https://www.semanticscholar.org/paper/f04ee1d137f19a61df0afa7c5a6a3f65121b8590
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Citations in the corpus
- Green credit policy and firm performance: What we learn from China (2021, methodology): “Then, following Chen et al. (2018), we observe the results of placebo tests.”